Instructor Tom Chapdelaine, 53, left, observes Stacie Peterson, 21, pipe welding in the training shop at St. Paul Pipefitter Local 455 in St. Paul on Thursday, Jan. 28, 2016. The baby boomer retirement wave will strongly affect Minnesota’s work force. “I build demolition derby cars and learned welding at home. I enjoyed it so much that I pursued it,” said Peterson. “I enjoy perfecting everything. The job outlook is great and I like learning hands-on.” (Pioneer Press: Jean Pieri)

But some Minnesota companies — particularly in industries where there are already few replacement workers to be found — aren’t exactly breaking out the bubbly.

Minnesota’s unemployment rate now sits at 3.5 percent, and is anticipated to drop even lower. But state officials and some industry analysts fear the tight labor pool has a less-than-silver lining: softening job growth as companies scramble to fill skilled positions with bodies that just aren’t there.

“We’ve already started to see significant slowing,” said Steve Hine, research director for the state Department of Employment and Economic Development.

“It’s a huge crisis that’s unfolding in slow motion right before my eyes,” said Joe Coombs, a longtime trades recruiter for Express Employment who has visited 50 factories and manufacturers across the state.

“I’m hearing stories that they’re actually starting to offer jobs in accounting to sophomores,” said Steve Kenney, regional vice president in charge of Minnesota for Robert Half International, one of the largest staffing agencies in the country.

Nobody doubts that more immigrants will flood to Minnesota — as they increasingly have over the past decade. Whether they have the right skills is another story.

But aside from that, relief hinges largely on one big question: Will Minnesota’s baby boomers stick around? Or, like all the generations before them, will they retire as soon as they’re able?

Will They Stay? Will They Go?

Over the past 15 years, that slowed significantly, to a quarter of what it was: 10,000 additional workers a year. The recession masked those losses: job growth in Minnesota from 2002 to 2012 was relatively dismal: 1 percent.

But now things are picking up — with Hine’s agency estimating 7 percent potential job growth for the next decade.

But as for workers to fill those jobs, DEED estimates that with the baby-boomer wave in full effect, growth will be cut to a quarter again by 2020, with only 2,094 people coming into the work force annually from 2020 to 2025.

Let’s back that up: 40,000 extra workers a year during the end of the 20th century, becoming 2,094 extra workers a year in 2020.

Things will pick up again after that, and by 2030, labor-pool growth will likely return to comfortable levels.

But in the interim, “It’s going to be a real game-changer in terms of availability of workers to staff companies or startups,” Hine said. “They’re going to operate in a much more competitive environment than we have had in 65 years.”

Estimates vary, of course.

The Metropolitan Council is more optimistic, saying it believes there will be enough people in the metro area to cover upcoming workforce demands.

That belief is based on a big assumption: that many baby boomers will continue to work into their retirement years.

For the decade of 2020 to 2030, for example, the Met Council predicts that 73,000 additional workers older than age 65 will remain in the workforce in the metro area, based on an economic model created by a Massachusetts-based contractor, Regional Economic Models Inc.

Other estimates, however, make that prediction look a little rosy. The state demographer, for instance, predicts only 50,000 additional older workers in that time period — for the entire state.

Hine said he believes that even the demographer’s numbers — which do include a larger number of retirees continuing to work — are debatable.

“Everybody I talk to that’s approaching retirement age is quite anxious to do so,” Hine said.

The model used by the Met Council — which it called “moderate and middle of the road” — was based on older people living longer, updated estimates of their finances, and the ongoing change in age required to receive full Social Security benefits.

But actual data accumulated so far isn’t encouraging.

The baby-boomer generation began officially retiring in 2011, and so far, they haven’t worked much longer than previous generations, according to state demographer data.

“We see a little increase, but not what people envision. It’s just overwhelmingly the same type of labor force participation that we’ve seen before,” Minnesota state demographer Susan Brower said.

Destination Minnesota?

There is another assumption built into the Met Council’s estimate: the belief that Minnesota’s “foreign-born workforce” will increase significantly as well.

It’s true that, while Minnesota has historically lost its native workers to the coasts, immigrants have been moving to Minnesota in ever-increasing numbers, particularly over the past decade.

Metropolitan Council officials have a strong belief that word of the metro area’s job market will draw more people, not just internationally but from other states as well.

“We may see that again,” Hine said. “I think it’s significant that Minneapolis and St. Paul are getting generally a lot of good press as a favorable place to locate.”

Still, with job markets improving all across the country as the boomers retire, won’t that make Minnesota simply one destination of many?

“I don’t think we have any comparison in our recent history to really tell how people will react,” Brower said.

And as far as the skills immigrants bring with them — or the education they eventually receive — there are big differences, depending on the country they came from.

According to a state study conducted several years ago, only 15 percent of Hispanic immigrants and 17 percent of Hmong immigrants had a college degree, compared with 33 percent of white Minnesotans. Compare that with 88 percent of immigrants from India and 67 percent of those from China holding a college degree.

Met Council officials acknowledge that, even with the job pool they’re predicting, it will be a challenge to take on that knowledge gap — the same gap that community and business leaders have been talking about for years.

Good Work, and You Can Probably Get It

But back to the good news.

For younger — and even older — workers, there’s a lot of talk from the private sector about flexibility, benefits, job offers for college kids still enmeshed in classes.

And, in a few admittedly anecdotal cases, increased wages.

A study released in November by the Department of Employment and Economic Development on Minnesota’s aging workforce showed that some industries will be particularly affected by the boomer retirement wave.

Those include education, transportation and warehousing, mining, utilities and public administration, all of which now have roughly 3 in 10 workers age 55 or older.

But the task of targeting those industries is a years-long effort.

“Oftentimes by the time we’re focusing our efforts at the college level, it’s too late,” said Carrie Patton, president of the Twin Cities Human Resources Association. “We really need to be focusing on the high-school level.”

Others point to the skilled trades, engineering and the financial sector as areas where there are already significant worker shortfalls in Minnesota.

“The ranks of accounting and finance areas I think are going to be dramatically impacted. There are a lot of kids going in, but not enough to replace the folks leaving,” said Kenney, the regional vice president for Robert Half International.

Kenney said his daughter was offered an accounting job at a big firm as a junior in college. He has heard of instances where those jobs are now being offered to sophomores.

As for the trades, Coombs, the longtime trades recruiter for Express Employment who has visited 300 factories and manufacturers across the country, said jobs pertaining to the maintenance and repair of manufacturing machines are really hurting for applicants.

A lot of what happens in manufacturing is what Coombs calls “tribal knowledge.” When only one person in a shop knows how to run a machine and that person retires, the shop’s in real trouble.

“It’s a huge problem for us. Skilled machinists are hard to find,” said Sarah Ervin, owner of Vadnais Heights-based Heavy Equipment Repair Inc. “We’re small enough, 15 people, we have to hire people with some experience, and it’s so hard to train them. We just don’t see so many young people coming along; we’ve all just been aging through here.”

And when it comes to younger workers, Coombs says, “Hey, there’s a lot of jobs that aren’t fun to do: back-breaking jobs, work in a sheet metal shop grinding or bending metal. … As those people leave the workforce, the Gen Xers and millennials don’t want those jobs; they don’t see the point.”

And if you’ve got your pick, why do it?

Coombs laughs a little at theories for retaining or hiring workers based on massaging satisfaction levels or offering flexibility.

His No. 1 solution? “Pay more money. You’re just going to have to pay people what they’re worth.”

Or more.

In some cases, Coombs has seen younger workers brought into shops with a bare minimum of knowledge being paid $25 an hour for a $17 an hour job.

“And they know they’re not worth that — the company’s told them. But by overpaying a millennial, that’s how you earn loyalty. You think — with the cost of college debt and buying a house these days — they want things other than money? That’s baloney.”

Stacie Peterson, 21, of Ellsworth, Wis., is working toward an apprenticeship in St. Paul. Recently, she went on a tour of seven shops.

“Every one we went to, they were handing out applications and asking people to work there,” Peterson said. “A lot of them, they were just taking people off the streets and training them in-house because they don’t have enough people. And the wages, they’re going up dollars at a time.”

Jim Johnson, who owns two Express Employment Professionals franchises in Eagan and Edina and is also president of the Minnesota Recruiting and Staffing Association, said, “Last year, we were able to fill for $10 an hour. Now, if people call offering under $12, we tell them we’re not sure we’ll be able to help them.”

And as for older workers, “The employee that’s been around 40 years isn’t just cavalierly tossed in the wastepaper basket the way they were 20 years ago,” Kenney said. “They’re making more part-time opportunities, or allowing them to go on contract for projects.

“Not only because it’s the right thing to do, and not because they have a lot of experience, but because they don’t have any choice.”

Boardroom Chatter

Still, there is a real question about how much companies are doing to get ready.

Two years ago, Robert Half surveyed 2,100 chief financial officers from a random sample of companies nationwide. They found that more than two-thirds — 69 percent of them — were either “not at all concerned” or “somewhat unconcerned” by the baby-boomer exodus.

In a statement about the study, Robert Half senior executive officer Paul McDonald said those companies “should prepare themselves.”

While bigger companies often feel they’ll be fine — that people will apply to them no matter what — “I hear from nonprofits, smaller organizations, and they’re saying they can’t hire. I think that’s where people are feeling it the most,” said Philomena Morrissey Satre, whose job is to recruit and retain diverse talent — including older workers — at Wells Fargo.

Johnson, the head of the state recruiting and staffing association, says companies are aware — but there’s not a lot of concerted talk about it.

“Most of that conversation turns to the millennials, how to deal with the millennials. People don’t talk about the baby boomers, it’s a known fact. You can have all the seminars you want; the boomers are still going to leave.”

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Look for an “exit tax” to be proposed like the banana republics slap on anyone who dares to exit the country.

Gagmewaspoon

We’re lucky they don’t post sentries on the interstate overpasses to shoot at us as we leave. The only thing preventing them is that they hate guns.

SlackDaddy

Met Council – why are they relevant here?

stormyweather1

Because they pay for the kinds of demographic research and data that local governments rely upon to make informed decisions about future planning and growth. Conducting one study instead of 100 is efficient and saves local governments money.

But I’m guessing you just wanted to say something snarky about regional governance.

EastSider

You mean the study that is proving to be wrong in the article above?

The model used by the Met Council — which it called “moderate and middle of the road” — was based on older people living longer, updated estimates of their finances, and the ongoing change in age required to receive full Social Security benefits.

But actual data accumulated so far isn’t encouraging.

The baby-boomer generation began officially retiring in 2011, and so far, they haven’t worked much longer than previous generations, according to state demographer data.

stormyweather1

OMG you mean that two economic models don’t agree exactly on what will happen? The future is not perfectly predictable? The horror! Surely we should just make guesses based on the intuition of everyday citizens!

EastSider

A lefty group could do a study that says the sky is red and grass is blue and you would defend it.

stormyweather1

I’d suggest we commission a new study to confirm or refute the finding. Data’s great. The more of it, the better.

SouthernGuy

“But state officials and some industry analysts fear the tight labor pool has a less-than-silver lining: softening job growth as companies scramble to fill skilled positions with bodies that just aren’t there.”

This is true. Minnesota’s usurious tax system is causing skilled workers, ones who want to establish a career and residence (as in a home with spouse and kids) to flee the State like deranged lemmings to more tax-and residentially-friendly environs. And is not only the skilled workers who are fleeing, but older adults with money as well. Minnesota taxes everything–if it lands in your wallet in Minnesota odds are huge that you have paid tax on it. For retirees this means that Social Security and pensions are taxed here: quite a few other states (usually ones in warmer climates) do not, and retirees are leaving to take up residence in these states. And the young, skilled people? Well, why stay in Minnesota and pay taxes to support every shiftless Tom, Dick or Harry imaginable when you can move to somewhere else that lets you keep more of your money AND has a less costly standard of living? Don’t believe me? Check real-estate prices in places like South Dakota (no state income tax at all, along with far lower crime rates) to places like Minneapolis and suburbs. It’s easy to see why so many people with skills and/or money are skedaddling.

As Michigan went, so will Minnesota go. Will there be jobs? Sure–if picking peas or stacking pallets in a cannery defines your particular “skill”. But don’t expect more than that.

stormyweather1

You should provide a data source instead of your rambling conjecture. It’d be more persuasive.

I’ve lived in South Dakota. Sioux Falls does an excellent job recruiting low-wage employers and call centers, to be sure. Alas, that’s about all they offer in terms of employment. The low taxes help large corporations there, but nowhere else. South Dakota’s schools are mediocre, filled with some of the worst-paid teachers in the country. Oh, and they’re perpetually desperate to recruit out-of-state labor for skilled work because their schools can’t generate the talent they need and they can’t keep their own best and brightest kids because those kids know there’s no economic opportunity there. You know where many of those best and brightest kids end up? Here, in the Twin Cities. It’s a good deal. They get a better education, better job opportunities after college, better restaurants, better cultural amenities, and a better quality of life, and their families are still within driving distance.

Guess what they don’t do? Move back home to South Dakota to take underpaid, dead-end jobs so they don’t have to pay a state income tax.

So yeah, if you want to move to a rural wasteland whose largest city is a glorified version of Eden Prairie, have at it.

D'On'ta'y Kuffar_Smiff

I’m pretty sure there are millions of people unemployed and underemployed to fill the gaps. studies like these are laying the groundwork as a defense for Open Borders and importing more cheap labor

stormyweather1

Not really.

No economist worth their salt would worry about unskilled and semi-skilled labor. It doesn’t take years of education to train someone to weld or work on an assembly line. You can start those employees in basic positions and move them into more complex jobs as their skills develop. To the extent that manufacturers are having a hard time finding semi-skilled labor, the issue is that wages are too low. The employers in this article are already acknowledging that.

Most of the vacancies being discussed here aren’t entry-level positions. They’re white collar administrative and technical positions, in both the private and public sector, that require specialized knowledge. The people being replaced are middle-level and upper-level employees with decades of experience. The barrier to entry for an accountant, for instance, is far far higher than for a welder – and even higher if you’re looking for a CPA. The guy who got laid off at the paper mill isn’t qualified for that job vacated by a 25-year public employee that manages a $50 million program.

The real challenge comes in helping these workers with a skills mismatch to retrain quickly and affordably so they can be integrated back into the economy.

But if you’re a college-educated employee in your 20s-40s doing the kind of administrative and technical work discussed in the article, the job market is going to be a bountiful one in the next 10-15 years.

permalink

“train someone to weld”

There no “skill” needed in welding anymore. The place I left from has all wire-feed welding and horizontal positioning. A monkey can be trained for that.

D'On'ta'y Kuffar_Smiff

the problem in flooding the market with unskilled and semi skilled laborers is that it drives down wages. plus, these workers get subsidized by not paying taxes and even getting the “earned income tax credit” (aka wealth redistribution)
*
instead of keeping the borders open, we need to work to bring manufacturing back to the US. not every one can either work for the government or work for some government funded “non profit”. there has to be a workhorse actually creating goods and services.
*
as far as accountants and CPA’s being so valuable and difficult to replace, if the tax code were simplified, that would solve that issue

stormyweather1

For sure – tax code simplification would do wonders for reducing the cost burden on our economy of accounting services. But I also think it’s safe to say that the young accountants of the world have little to worry about in terms of their long-term job security.

The perception that nothing gets made in America is somewhat inaccurate as well. The economic value of knowledge has increased exponentially relative to the value of production. An economist, in conceptual terms, would simply refer to what we’ve gone through over the last few generations as creative destruction of of labor and shrug his shoulders.

But as it goes, that displacement creates serious problems in the real world (a place economists hate) and like you said, that’s what we need to sort through. Whether that’s wage assistance, tariffs or other trade restrictions that keep manufacturing jobs in the U.S., etc. As I’m sure we both know from plenty of everyday experiences, not everyone is going to be well-equipped to participate in a knowledge-based economy, and we have to figure out a path forward that keeps those people productive too.

imdbcooper

Will the baby boomers stay here in retirement with oppressive taxation and business transition taxes is a bigger question.

stormyweather1

Some will. The overwhelming majority won’t. Just like taxation is a subordinate concern for business compared to being able to find educated employees, it’s also subordinate to personal issues in retiring. If you’re an empty nester whose kids flew the coop and live elsewhere in the country, yeah, there’s certainly an allure to moving closer to kids. But if your kids are here and your life has always been here, you’re probably not moving to save 3-5% in state income taxes unless you really hate shoveling or love golf.

Tim Cich

Why should they stay is the big question. Sure, MN is beautiful 7 months out of the year, but the winters are brutal. You work all your life and save and invest so that you can retire and live a comfortable life. Then along comes the gov and taxes you on your investments so that they can give away money to those who didn’t save and invest. Or you can move to a warmer state like TN or FL where they don’t tax you to dead. Changing my home state from NY to FL saved me enough in taxes to pay for my FL winter home. The sooner you retire, the more you will thank yourself for years to come. I did it after being laid off by Lockheed Martin at 55 and thank them every day for adding years on to my retirement.

stormyweather1

Everyone understands the reasons you’ve laid out. Alas, data indicates that virtually nobody does what you’ve done. People in retirement generally don’t want to move away from their friends, their families, their churches, their communities. There’s nothing we can do here in terms of taxes to combat the fact that you don’t have to shovel in Florida. Our efforts are better spent elsewhere than trying to appease a tiny, tiny sliver of the population that was never going to stay anyway.

Tim Cich

First, first my neighbor went and then returned to tell the story. Next year a few more followed and so on and so on. We rented a home the first year and had the family come down. They loved it so much that some are also now looking for places. Now a lot of our friends and family are down here also with the grand kids coming to visit. Funny how many people I run into from MN and the upper Midwest. They all say weather is first reason and taxes are a strong second. That what you believe to be a trickle of people has become more like a steady stream that is driving prices up.

stormyweather1

People argue by anecdote when they don’t have anything better to back up their position. Read up on some actual data about who leaves, how many of them there are, and why, and you’ll understand why this isn’t an issue even worth discussing.

We lose about 2,000 people each year between the ages of 60-69. That’s it. You think there’s a tax rate low enough to keep them here? I don’t. I wish them well in Florida.

Meanwhile, we lose nearly five times as many people between the ages of 18-24. Most of them are leaving for college out-of-state. I’d much rather do something to encourage those kids to stay, since unlike our retirees, they’re actually positioned to contribute to the state’s economy going forward.

Gagmewaspoon

Minnesota is one of only 13 states that actually has the audacity to tax social security benefits. The state needs the money more than grandma needs her groceries it seems.

EastSider

The Met Council doesn’t care…in this case they are just looking for ways to make their ‘rosy’ estimate work out, even though the facts are showing it is incorrect. Sort of like most Liberal programs.

Hillary-Licious

Its ok….Somalis and illegal Mexicans will fill the holes.

Bob

Try googling the worst states to retire in. Good ol’ Minnesota the top of the list along with Nebraska and a few other places. They tax Social Security, IRA, pensions, the whole show. I am a soon to retire baby boomer and right now I am thinking Arkansas or even Wisconsin. There are better places I know like Florida but those two are much better than MN.

Gator

Arkansas ? Wow. Enjoy.

Crimewatch

Not the way the state spends our money!
Lawmakers think of a budget surplus as a piggy bank.

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